Is Sterling's rebound beginning to fizzle out?

The recent rebound by Sterling exchange rates begun to show signs of reversing last week, and if the 'Brexit' polls continue to provide as good an indicator of sterling exchange rates as they have so far, I personally wouldnt be surprised to see Sterling continue to decline in the lead up to the EU Referendum on the 23rd of next month.

Towards the end of April Sterling had surprised many within the financial world after spiking upwards. At that time the 'Brexit' polls showed a strong lead for the 'Remain' camp after numerous leading political and economic leaders such as US President Barack Obama and International Monetary Funds Christine Lagarde, publicly warned the UK of the risks to the country should we decide to leave the Eurozone. The lead in the polls for the 'Remain' campaign then boosted sentiment towards the Pound and this was then reflected in Sterling exchange rates.

Since May has begun the polls have taken a turn, as have the fortunes of most GBP currency pairs. While the polls overall this year suggest more support for Britain's continued membership of the EU, so far in May theyve indicated that support for a 'Brexit' is increasing. So far this month Sterling has fallen almost 3 cents against the Euro and 2 cents against the Dollar, and these falls have coincided with the gain in support for a 'Brexit' in May.

With the Leave campaign beginning to focus in on security as one of, if not the main reason for a UK 'Brexit', I don't think we should rule out further support for the campaign and therefore, further Sterling weakness.

News has come out this morning that David Cameron will give a speech later today suggesting that Europe could be at risk if Britain votes to leave the EU. Also over the weekend former MI6 boss Sir John Sawers has warned that leaving the EU would make the UK ‘less safe’. I expect the commentary regarding the EU referendum, which is now just 6 weeks away to really pick up steam in the media from now on.

Those with a Sterling currency requirement looking to avoid further potential downside to the Pound's value may wish to get in contact with their broker here at currencies.co.uk today, as the major announcements for the UK economy get started tomorrow and should they disappoint, we could see another poor week for Sterling exchange rates, particularly if the 'Brexit' polls continue to show support for the 'Leave' campaign as they have so far in May.

Will last week’s downward trend continue this week?

The week ahead could provide us with a stronger sense of direction for Sterling exchange rates as there's a hectic week of economic data due for release.

Tuesday will see the release of Trade Balance figures for March. I expect these figures to be heavily scrutinized by the market place as the previous quarterly figure up to February was the highest ever recorded negative balance according to the Office for National Statistics (ONS).

Manufacturing Data is set for release on Wednesday morning, both on a monthly and yearly basis. I consider these figures to be important with the potential to create market swings as a recent Markit/CIPS survey showed that the UK's manufacturing sector is contracting for the first time in 3 years in April. Also on Wednesday the National Institute of Economic and Social Research release their quarterly GDP estimate, which is expected to show a decline, although I think is could only be temporary as Brexit risks may have slowed business output as businesspersons, both home and abroad, are less likely to take risks around this time as its so close to the Referendum.

Thursday is expected to be the highlight of the week as the Bank of England (BoE) will publish its Quarterly Inflation Report and announce its Interest Rate Decision along with how its members voted. Rates are expected to remain unchanged with all 9 voting members to vote against hiking the rates, but expect volatility on the exchange should the announcement spring any surprises.

To hear more about upcoming data releases or events that could affect your currency exchange, or to discuss the impact of the EU Referendum on exchange rates, please feel free to call me on 0044 1494 725 353 or email me at jxw@currencies.co.uk.

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